ONGC to Invest $5.07 Billion for KG Basin Block

ONGC announced $5.07 billion investment in its KG basin oil and gas block but the delay on government’s part in approving a higher gas price for difficult areas would mean the output would be delayed by one year to 2019-20.

The board of Oil and Natural Gas Corporation approved $5,076.37 million investment in bringing to production 10 oil and gas discoveries in the Bay of Bengal block KG-DWN-98/2 (KG-D5), which sits next to Reliance Industries flagging KG-D6 fields.

“First gas production is envisaged by June 2019 and oil would start flowing from March 2020,” said D K Sarraf, Chairman and Managing Director, Oil and Natural Gas Corporation (ONGC) after the board meeting.

Oil and Natural Gas Corporation had in 2014 announced plans to start gas production from 2018 and oil by 2019 but a final investment decision was made contingent upon government approving a remunerative price for the deepsea block as the current rate of $3.8 per million British thermal unit was uneconomical.

The government earlier this month announced a new pricing formula for difficult areas that would at current prices give developers just over $7 per mmBtu price. Sarraf said the field development is economical at the price announced and the board at its meeting today approved the investment plan for Cluster-II group of discoveries in KG-D5.

The 7,294.6 sq km deepsea KG-D5 block has been broadly categorised into Northern Discovery Area (NDA – 3,800.6 sq km) and Southern Discovery Area (SDA – 3,494 sq km). The NDA has 11 oil and gas discoveries while SDA has the nation’s only ultra-deepsea gas find of UD-1. These finds have been clubbed in three groups – Cluster-1, Cluster-II and Cluster-III.

Gas discovery in Cluster-I is to be tied up with finds in neighbouring G-4 block for production but this is not being taken up currently because of a dispute with RIL over migration of gas from ONGC blocks, Sarraf said.

“AP Shah panel is looking into the issue and we would proceed on it once the dispute is adjudicated,” he said. Sarraf said from Cluster-II a peak oil output of 77,305 barrels per day is envisaged within two years of start of production. Gas output is slated to peak to 16.56 million standard cubic meters per day by end-2021.

Cluster-2A mainly comprises of oil finds of A2, P1, M3, M1 and G-2-2 in NDA which can produce 77,305 bpd (3.86 million tonnes per annum) and 3.81 mmscmd of gas. Cluster 2B, which is made up of four gas finds — R1, U3, U1, and A1 in NDA — envisages a peak output of 12.75 mmscmd of gas. Peak output is likely to last 7 years, he said.

Cluster-3 is the UD-1 gas discovery in SDA. “UD-1 lies in water depth of 2400-3200 meters and there is no technology to produce from such depths. And so Cluster-3 is presently not being pursued for development,” he said.

Sarraf said Cluster 2 of the KG-D5 Block has been divided into two parts — Cluster 2A which has estimated in-place reserves of 94.26 million tons of crude oil and 21.75 billion cubic meters of associated Gas; and Cluster 2B which has estimated in-place reserves of free gas of 51.98 bcm.

“Total oil and gas production envisaged is 23.526 million tons and 50.706 bcm respectively during the project life from the Cluster 2,” he said, adding that the peak daily production rate from the Cluster 2 works out to 16.89 per cent and 27.60 per cent of Oil and Natural Gas Corporation’s current production rate of crude oil and natural gas respectively.

Gas produced is proposed to be taken to a Fixed Platform in shallow water depths through an 18-inch, 16.1 km pipeline and treated and subsequently evacuated to Odalarevu onshore terminal in Andhra Pradesh through 20-inch, 35.5 km pipeline for sales.

Oil produced from Cluster-2A is proposed to be taken on to an FPSO (Floating Production Storage and Offloading) anchored in high-sea through an 18-inch, 21.5 km pipeline. Oil will then be transfered to tankers for transportation to refineries.

Sarraf said a total of 35 wells are planned to be drilled for which the company will float a tender to hire three deepsea drilling rigs.

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